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De-crypting cryptocurrencies

Part of SWIFT’s mandate is to debate issues of mutual interest – so where we can, we will help to accelerate, collate or disseminate analysis that helps our members deploy innovation successfully. We also use our experience and analysis to help our Community to consider the practical implications of new business models, taking into account key factors such as evolving business demands, security, and compliance requirements.

In this context, Wim Raymaekers, SWIFT’s global Head of Banking Markets contributed a new paper on ‘Cryptocurrency Bitcoin: Disruption, challenges and opportunities’ to the Journal of Payments Strategy & Systems.

Crypto protocols such as Bitcoin and distributed ledger technologies such as the Block chain are just a few of the new experimental innovations in financial services that are gaining media attention and could have valuable applications. However, it is early days in terms of understanding the impact they will have on the banking industry.

Looking specifically at the purpose of cryptocurrencies for making payments, the paper aims to illustrate (1) the key challenges that cryptocurrencies must overcome to achieve widespread customer adoption, (2) the major risks regarding cryptocurrencies, when and how cryptocurrencies and their service providers will be regulated, (3) in their current state, what are the ‘killer apps’ for cryptocurrencies, and (4) the more fundamental issues cryptocurrencies must address.

In conclusion, while Bitcoin is not predicted to replace traditional and new payment methods in the short term, banks should consider the underlying technologies to uncover what future value they may bring over the longer term.

Cryptocurrency Bitcoin: Disruption, challenges and opportunities

Comments and opinions on this topic and the paper are most welcome. Please contact Wim Raymaekers.

In addition, SWIFT is analysing crypto protocols and distributed ledger technologies, positioned for international and real-time funds transfers. Analysis includes technical aspects such as messaging, security, reliability, resilience, quality of service, ease of implementation and also commercial, business practice, legal and compliance considerations. For further information please contact Wim Raymaekers.